American companies seek to shift overseas manufacturing as labor costs rise in China

A family-owned plastics company in Middlefield is reaping the rewards of a smart investment in Mexico.

The company, Flambeau, nearly became what owner Jason Sauey calls lemmings — “American companies that rushed to China to make things like toys and toilet brushes, only to be searching now for alternatives in Mexico and the United States,” according to this long feature in The New York Times.

Flambeau resisted the China temptation, turning instead to its factory in Saltillo, in central Mexico. And now the company, which makes Duncan yo-yos, hunting decoys, plastic cases and industrial items, is glad it made the choice.

“Revenues at its Mexican plant have grown by 80 percent since 2010, prompting a search for a second location near Mexico City,” The Times reports. “And in the past year, a dozen corporations have come to Flambeau and requested bids on projects worth tens of millions of dollars for things like smart phone cases and car parts.”

From his Middlefield office, Sauey tells The Times, “They’re all looking for a new model. “It’s not just about cost; it’s about speed of response and quality.”

The newspaper reports that with labor costs rising rapidly in China, “American manufacturers of all sizes are looking south to Mexico with what economists describe as an eagerness not seen since the early years of the North American Free Trade Agreement in the 1990s.” American trade with Mexico has grown by nearly 30% since 2010, to $507 billion annually, and foreign direct investment in Mexico last year hit a record $35 billion.

The Times says that since Sauey joined the business in 1985 at the urging of his father, a co-founder, “sales have grown to $230 million, up from $65 million. … The company has largely thrived through a calculated mix of investment in Mexico and in the United States.”

The story describes Sauey, 52, as “compact and serious, a passionate libertarian with an M.B.A. from the University of Chicago, (who) insisted that cross-border production keeps American companies alive.” At the plant in Middlefield he “pointed to a hulking contraption with robotic arms sprouting from the back,” according to the story.

The paper notes that the machine, which cost $2 million, “turns the raw materials of hard plastic into one of Flambeau’s best-selling products, cases for art supplies.”

A generation ago, Sauey notes, the factory in Middlefield did about $14 million in sales. Now, because of investments in more sophisticated technology, it does twice that with the same number of employees, 180.

“The factory in Mexico has more space, many more employees — about 480, making about $17.70 a day — and more machines, many bought used,” The Times reports. “Both factories will generate roughly the same amount of revenue, according to company estimates. But while the Middlefield plant focuses on high-end plastic cases for everything from guns to medical supplies, the Saltillo factory makes simpler products — bottles for windshield washer fluid, yo-yos, hunting decoys.”

This and that

“Much like park visitors, Cedar Fair investors have had a wild ride, although the stock (ticker: FUN) now is on course to deliver more thrills than chills,” the publication says. “Business, which hit a deep rut amid the recession, has improved along with the economy. The company, based in Sandusky, has reduced the debt load that nearly sank it after a 2006 acquisition, and is reinvesting in the parks, which attracted 23.5 million visitors last year.”

The story notes that Cedar Fair units “have rallied 24% in the past year, to a recent $52, and could climb to $60 in the next two years,” according to Alan Bazaar, CEO of Hollow Brook Wealth Management, a New York–based money manager. Add a yield of 5.4%, courtesy of the company's generous annual distribution of $2.80 per unit, “and investors could pocket a total return of 20%,” Barron’s says.

Central to the bullish case, says Bazaar, “is Cedar Fair's ability to post a 5% increase in annual earnings before interest, taxes, depreciation, and amortization, and command a multiple of 9 to 10 times enterprise value to Ebitda,” Barron’s reports. “Although Hollow Brook's cost basis in the stock is about $31 per unit, the firm is buying shares for new clients.”

Many Cedar Fair fans credit the company's recent performance, and that of its shares, to the initiatives of CEO Matthew Ouimet, 56, who came aboard two years ago. Ouimet spent 17 years at Walt Disney where he ran Disneyland and Disney Cruise Line. He has brought in other Disney alumni and "really changed the culture," says Bazaar.

Barron’s notes that Ouimet, who will be presenting at a Goldman Sachs conference this week, “has maintained a modest long-term target for Ebitda growth of 4%. Results exceeded that target last year, as revenue rose 6%, to $1.1 billion, and Ebitda, adjusted for nonoperating items, gained 9%, to $425 million. Revenue benefited from a 1% increase in park attendance, and higher ticket prices and guest spending.”

For decades, the Associated Press notes, “seasonal allergy sufferers had two therapy options to ease the misery of hay fever. They could swallow pills or squirt nasal sprays every day for brief reprieves from the sneezing and itchy eyes. Or they could get allergy shots for years to gradually reduce their immune system's over-reaction.”

But now, “patients can try another type of therapy to train their immune system, new once-a-day tablets that dissolve quickly under the tongue and steadily raise tolerance to grass or ragweed pollen, much like the shots,” according to the story.

The Food and Drug Administration has approved two tablets from Merck, Grastek for grass pollen and Ragwitek for ragweed, plus a grass pollen tablet called Oralair from Stallergenes.

“The tablets could become popular with people who dislike pills that can make them drowsy or don't provide enough relief,” according to the story.

But they might not be right for everyone, particularly patients with allergies to multiple substances, Szekely cautions.

“That was the case with one of her patients, 10-year-old Samantha Marshall of Mentor, who has been getting allergy shots since last fall,” according to the story.

"She's not loving them," her mother, Rachel, tells the AP.

Szekely says shots are more effective because Rachel is also allergic to weeds and dust mites, and the shots she receives are a customized mix of extracts to all those substances.

Talk it out: MarketWatch.com reports that a new survey from credit rating agency Experian finds that credit scores are the No. 1 financial issue that couples don’t discuss before marriage.

“While roughly three in four couples talked about their spending habits and student loan debt before they tied the knot, just 43% talked about their credit scores, the survey of more than 1,000 American adults revealed,” according to the story.

More than one in 10 couples aren’t talking about their credit scores even after they wed.

Bob Gavlak, a certified financial planner at Cleveland-based Strategic Wealth Partners, tells the website, “There’s often a level of hesitance about talking about these things. It’s an extremely personal matter.”

Some people simply are “embarrassed” about past financial behaviors, Gavlak says.

Couples looking to remove some financial stress from a marriage should have monthly money meetings, he advises. Gavlak also recommends going through your budget, looking at how much money is going in and how much is going out.